PYUSD is causing protracted debates in the crypto scene
PayPal’s stablecoin PYUSD is causing protracted debates in the crypto scene. Opponents see the token as a threat to individual freedom, while a prominent proponent is adamant about the utility of the digital currency. A smart contract expert also has his say. He warns interested parties against using the product.
PYUSD: That’s why an expert warns against PayPal’s stablecoin
It was only two days ago that PayPal USD (PYUSD), the stablecoin of the well-known financial service provider PayPal, was launched. With the new product, the company wants to remain interesting and competitive as a payment service provider while digital payments continue to transform.
Criticism quickly spread among skeptics – even before details of the project were even known. Critics expected a tightly controlled currency with centralized powers from PayPal.
In the meantime, an expert has also commented on the token and agrees with the critics on some points. Programmer Pashov examined the PYUSD smart contract code and is disappointed with several features within the source code. He therefore warns users against using the token.
“The new PayPal USD stablecoin has an ‘assetProtection’ function that can wipe your balance in two transactions (first `freeze`, then `wipeFrozenAddress`)” explains Pashov . He continues further:
“In smart contract security, we call this a ‘centralization attack vector’.” Specifically, Pashov is addressing the possibility that PayPal can delete the PYUSD assets of certain addresses without any problems.
Although similar methods would also be possible within the classic financial system at banks or via PayPal’s previous offer, such functions are always met with a lot of rejection in the crypto scene. Self-determination plays an important role here – after all, this is a central content of crypto.
Is the criticism of the PayPal stablecoin redundant?
Despite the serious security risks for end users, the question arises as to whether the criticism of the PayPal stablecoin is redundant. The background to the topic is the fact that PYUSD is just one of many centralized stablecoins, which are usually very similar in their functions.
The very first and all-time leader stablecoin Tether (USDT) shares the same vulnerabilities – just like the second-ranked USD Coin (USDC). Both stablecoins are a constant source of contention, with issuers Tether and Center repeatedly freezing funds from users. In some cases this was done at the request of governments, in other cases the theft of funds was prevented.
This fact does not mitigate the negative effect that PYUSD could have on its users by utilizing the same ideals. In addition to critics, there are also advocates of this property. This is how David “JoelKatz” Schwartz, technical director of Ripple, commented on Pashov’s criticism.
“This is nonsense. Centralization is the advantage of the stablecoin, as PayPal is legally obliged to redeem it for dollars at a 1:1 rate.”
This reduces the risk for end users of losing money through hacks, scams or other theft. With PayPal as the inevitable middleman, criminally acquired money would no longer have any use.
Other users show little understanding for Schwartz’s view. They point to the control that PayPal has and the downside of that fact. So it also comes into play that the US group threatened users with a fine of 2,500 US dollars at the end of 2022 if they “spread false information”. After an outcry, the company quickly backtracked.
Schwartz gives the all-clear – it is not a true crypto product. Rather, PYUSD can be compared to a classic bank deposit, but the token can be connected to the crypto market.
This isn’t really crypto. This is conventional finance. It’s like money in a bank – someone else’s legal obligation that you can in turn transfer to make payments.
What is the real benefit of PYUSD?
Schwartz also has an answer to the question of what the actual advantage of PYUSD is. As he explains on Twitter :
The crypto aspects offer several advantages. For example, one is not dependent on the infrastructure of the counterparty [PayPal] to transfer them. And even those who cannot or do not want to do business with the counterparty can use the token for payments.
More on the topic: PayPal releases its own stablecoin PayPal USD (PYUSD)